Analysis & Opinion

ROME/MILAN (Reuters) - The Italian government is ready to consider reducing planned cuts in incentives to the photovoltaic industry for a transitional phase, a government source said on Wednesday after complaints by investors.

Italy's solar sector, among the biggest in Europe, has boomed since 2005 when state-backed production incentives were first launched. But Italy has decided to scrap the existing generous solar incentives starting in June.

"The (Industry) ministry has shown a readiness in recent hours to reduce the size of the incentive cuts for the transitory period," the source said on Wednesday, the day before a key meeting of regional and state officials to discuss the incentives changes.

Rome's new draft support scheme would in part cap subsidies for solar developers at between 6 billion and 7 billion euros ($8.8 billion and $10.3 billion) per year by the end of 2016, when installed capacity is expected to be around 23,000 megawatts.

The scheme envisages a transitory period that would run to the end of 2012 to safeguard investments under way when the new law is passed.

The decree was presented to a meeting of Italian regional authorities and the state last week but the gathering was put back to April 28 to allow more time for studying the measures.

On Wednesday a group of foreign solar power investors said it had opened legal proceedings against Italy over the planned incentive cuts.

In a statement, Photovoltaic Operators Investors (POI) said it hoped the draft solar decree could be changed to make it "more equitable so as to safeguard and not prejudice investments made."

The group has brought proceedings against Italy under a 1994 European energy charter, it said.

POI said its members had made investments in Italy under regulations passed in August 2010 which had been changed once and which could shortly be replaced by other measures that were "worse, retroactive and discriminating."